BP: Oil Demand in U.S. Gas Market Peaked

BP: Oil Demand in U.S. Gas Market Peaked

LONDON -- BP Plc Chief Executive Officer Tony Hayward said demand for oil coming from the U.S. gasoline market "has probably peaked" as ethanol blending gains ground and Congress works on enforcing fuel efficiency, as reported by Bloomberg News.

"We probably sold as much gasoline into the U.S. as we’ll ever sell" in the first half of last year, Hayward said at a presentation of BP’s Statistical Review of World Energy in London. The U.S. "is not a growth market. Markets with growth in products are China, India."

Hayward also relayed the U.S. has the potential to offset future higher energy demand with efficiency measures over the next ten years. At the same time, investment in more biofuel production and the possible end of ethanol import restrictions may lead to replacing petroleum in transport fuels, Bloomberg reported.

As the largest oil and gas producer in the U.S., BP derived 34 percent of its $366 billion revenue from this country, while the rest of the world excluding the U.S. and Europe accounted for 21 percent.

Gasoline demand in the U.S. fell last year for the first time since 1991, according to the Energy Department in Washington. Motorists burned 8.964 million barrels of fuel daily in 2008, 3.5 percent less than a year earlier. The slump continued into 2009.

World oil production may peak at some stage, driven by limited demand from consumers, Hayward said. Rising oil prices may encourage wider use of alternative sources of energy and biofuels production expansion to substitute crude.

"The world has ample proven reserves" to "meet the world’s needs for decades to come," Hayward said. "It will be a demand-side phenomenon, not a supply-side phenomenon," which will limit global crude oil production. "Demand for fuel for transport in the U.S. has probably peaked" relating to hydrocarbons, he said.

BP’s energy review showed the net growth in world energy consumption last year came from the industrializing countries outside the 30-nation Organization for Economic Cooperation and Development (OECD).

"Non-OECD energy consumption was greater than OECD energy consumption for the first time" in 2008, BP Chief Economist Christof Ruehl also said at the presentation. "Non-OECD economies have had five years of the fastest growth ever."

BP is targeting the U.S. ethanol market as it plans to invest between $5 billion and $6 billion to expand production of the biofuel in Brazil. Earlier this year, it has appealed to Californian regulators to set the first U.S. example by suspending state import tariffs on Brazilian ethanol.

"We believe fundamentally in free and open energy markets and a tariff on imported ethanol is the tariff on the free energy markets," Hayward said. "It would be a good thing" to cancel the Brazilian import restrictions, he said.